Lewisham and Greenwich hospitals decide not to outsource procurement to Serco

News last week that a hospital trust in south London – the Lewisham and Greenwich Trust – has rejected a bid from Serco to provide procurement services after “concluding that it would not provide value for money”. Apparently, a first proposal from the firm looked good but after further work by Serco, the proposals didn’t look as attractive in terms of potential cost savings to the Trust. So procurement stays in house, for the moment at least.

There are a number of interesting points here. The potential work was not competed because, according to the Health Service Journal (HSJ),  “Serco did not have to enter a tendering process because it runs Anglia Support Partnership, under which it has a framework agreement to deliver support services to five NHS bodies. Any NHS trust can ask Serco to put together a proposal for services”.

So it looks like this framework allows any NHS organization to buy different outsourced type services from Serco, all based I assume on one original tender, run in one region, that they won. Now this is (probably) legally acceptable under procurement regulations, if the tender was set up to be used by anyone, but it is fundamentally anti-competitive, bad practice and a basic mis-use of framework agreements. This is the sort of manipulation of procurement rules and indeed simple good practice that does no-one any favours.

It reminds me of the proposal that Surrey and West Midlands Police put forward to outsource services to G4S based on a ‘framework’ let by Lincoln Police for their own purposes. That got dropped eventually thank goodness, as it was another example of inappropriate commercial strategy and a lack of understanding of one key basic principle - COMPETITION IS GOOD!

If your organization was looking to outsource procurement, wouldn’t you talk to more than one potential supplier? And frankly, it is not even as if Serco are a world leader in procurement outsourcing services. Are they even a leading edge organization in terms of how they run their own procurement? They’ve had quite a turnover of senior procurement folk in the last year or so, hence that’s an interesting question in itself.

The process also may be an illustration of the issues around spend data and MI. According to HSJ:  Serco business development director Samantha Bond said the initial savings projection was based on “the high level procurement information provided” but analysis resulted in “the level of benefits assessment [being] downgraded”.

Might this be addressable versus non-addressable spend coming into play? It’s easy to look at a high level spend figure and think, yes, we will find 5% savings there. But if half of that is tied up in long-term contracts, spend categories that are driven by commodity or currency movements which aren’t controllable, monopoly supply markets… Any experienced procurement practitioner knows that only a proportion of spend can really be attacked to release cost savings, at least in the short term. Perhaps that dawned on Serco as they went through the full due diligence on the proposal.

On the positive side, it is good to see a Board taking its responsibilities seriously, and not being afraid to say ‘no’ to an outsourcing decision. And it’s not a huge setback for Serco in the greater scheme of things, but it won’t encourage other Trusts to throw procurement their way, we suspect. And I wonder what Lewisham and Greenwich might do next to drive procurement improvement?

Voices (3)

  1. Trevor Black:

    Peter, you are correct that the way in which the framework agreement has been established is anti-competitive and I’m not sure how they have got away with it. If I remember correctly the rules were changed several years ago and third party organisations that were potentially to be involved with the contract had to be named within the OJEU contract notice. Establishing an agreement that leaves the door open to the world at large to participate in, fails to address the fundamental principles of transparency and probity. Any procurement professional would be aware of this or is this the reason why these organisations get themselves into such a mess. Could it be that it is deemed as the new art of “commissioning” which as we all know is nothing to do with procurement!!!

  2. Bill Atthetill:

    “Never outsource a problem.” I can imagine that their original proposition looked enticing but some trusts have fallen for this nonsense (and have fallen at the first hurdle). I’m absolutely delighted that their trust board booted them into touch – it’s wrong in so many ways – and now they need to invest their own team and in similar NHS-owned capability.

  3. Secret Squirrel:

    What about the Trusts who have already done this? They’ve already got hold of procurement at Norfolk and Norwich and Ipswich at least. I’d be very interested to see the value for money case for those.

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